Sunday Night Grain Outlook, 8-29-10

Sunday Night Grain Outlook
By Duane Lowry
Sunday, August 29, 2010

OPENING CALL:
Corn= steady-easier,     Wheat= steady-easier,     Soybeans= steady-easier.

Weather doesn't offer anything that seems very market-moving. Russian wheat areas with rains seems to still be expanding, easing concerns about fall planting. US Midwest/Delta crops are pretty much already determined, regardless of moisture conditions here forward. Some acres will benefit from expected moisture during the next 10 days, but I hesitate to say this expected moisture is bearish, mostly because the trade won't want to see it that way anyway. Early planting and aggressive GDU (Growing Degree Unit) rates this summer have moved the crop forward at a fast pace. This fast GDU pace should not be confused with drought/stress-induced crop maturity. Very few national acres are moving to maturity at a fast pace due to problems and therefore very few acres will find detrimental implications from this year's fast pace. Yet, in the current environment many seem to think the fast approaching harvest has yield-reducing tendencies so I suppose most will say weather is bullish. As long as price action doesn’t trump their assessments, truth doesn't matter and they will continue to assume their weather is bullish and correct.                        

News> I don't see much for news. Because stocks rallied on Friday many wanted to say Bernanke's comments Friday were bullish. I think the weekend assessments were more accurate and seemed to suggest his comments were really much more benign and no immediate easing activity should be expected, or at least not enough to alter what nearly all economic data has been suggesting for a long time and that is we are really fighting deflationary signals. I don't care how much money is on the Fed's balance sheet, it is not moving through the economy.      

Wheat may find support from slow European harvest conditions/forecasts, but I struggle to find this as a legitimate storyline. Also, some have wanted to focus on this the past several days yet price action has been quite lethargic. Some may also view the Russian moisture situation/forecasts as improving and thus easing concerns about fall sowings. Technical conditions could legitimately be seen as mixed, so I suppose some will want to be bullish. However, I see the overall tone to recent price action as weak and underperforming expectations on a daily basis. My read on the technical conditions is that they warn we may be ready for another push down. So, expect some to call thing higher tonight just because market sentiment is leaning bullish as the default setting. However, I am suspicious any early strength will again lack energy and the overall conditions warn of still price eroding themes in the weeks ahead. Personally, I don't think we have any reason to be higher tonight, but that doesn't mean we won't be.                                 

Corn will find mixed expectations. The trade was littered with talk of disappointing yields and I fully expect the trade to re-circulate that storyline again, causing some to expect higher initial trade tonight. While you can find any yield report slant you wish to hear, the trade wants to be bullish and that will remain the focus. Trader sentiment remains near universally bullish and will remain so until price action forces them to consider otherwise. Technical conditions offer plenty of warning, but so far traders still don't care. I do think it is very interesting to point out that we closed 1/4 cent lower for the week last week. Not that this 1/4 cent reversal is any big deal, for it is not, but in relationship to all the bullish sentiment and trader certainty the crop is getting smaller and some fear by a large amount, why weren't we up more significantly, or at least up for the week?              

Soybeans will find many willing to expect more strength this week, just because of general trader sentiment. There is no news. Most all boots on the ground are very optimistic about national yield potential. Technical conditions offer plenty of warning signs to the bulls and fundamental profiles are bearish and seem quite capable of becoming more bearish as harvest unfolds. However, nobody wants to sell. Last week found steady short-covering activity and certainly more determined short-covering activity occurred Friday, but is that activity done yet? Who knows?  I don't know why we would go higher tonight/this week, but I don't think we are justified to be where we are either. Yet, this is not enough of a reason to expect weakness tonight either. Weak price action, if/when it occurs, could quickly fuel selling interest from multiple sectors of the trade for multiple types of reasons, but we are still waiting for the price action signal that begins this process.                                

In summary, most will see no reason to expect anything but the default setting, which is bullish. Personally, I view weather as neutral/negative, but the market probably won't. Personally, I see the approaching harvest as a reason to stop seeing prices work higher, but most trader sentiment views won't. Personally, I see technical conditions as very much offering warning signs, but most don't, although they will as soon as we get the first good day's setback. Maybe we open higher, but I just don't see the legitimacy behind expectations for strength tonight.                 

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